Solomon Islands : Economy

Economy

GNI:

US$960m

GNI PC:

US$1,610

GDP Growth:

4.2% p.a. 2009–13

Inflation:

5.3% p.a. 2009–13

Solomon Islands’ economy is based on agriculture, forestry and fisheries, which together account for around 40 per cent of GDP and provide employment for the majority of the population. GDP grew by 6.4 per cent p.a. 1979–89.

Agricultural resources are limited; only 35 per cent of the land is suitable for cultivation and pressure on land is leading to soil impoverishment. Production can be affected by tropical storms.

During the 1990s fishing was a developing industry, encouraged by the declaration of a 320-km exclusive maritime zone. Forestry also contributed strongly, providing the dominant export product. The government was working with export partners and CDC Capital Partners to halt the depletion of forests.

Although public expenditure remained high, resulting in budget deficits and growth of public debt, economic growth was consistently good in the 1980s and 1990s until 1997 when the economy went into recession, due largely to the impact of the Asian economic downturn and consequent falls in export revenues. An economic reform programme was launched in early 1998 with the emphasis on public-spending cuts.

Recovery began in 1998–99, but was soon reversed as political unrest intensified: plant and equipment, along with infrastructure, were damaged; the gold mine at Gold Ridge was closed; and the economy collapsed, shrinking by 14 per cent in 2000, nine per cent in 2001 and 2.4 per cent in 2002, when the government was depending on aid to finance both the peace agreement (including economic development of the island of Malaita) and the budget.

After six years of recession the economy returned to vigorous growth in 2003. Strong growth continued in 2004–08, averaging 7.3 per cent p.a. But the economy remained relatively small and undiversified and very dependent on exports of timber and logs. Aid constituted 67 per cent of GNI in 2010, 48 per cent in 2011 and 34 per cent in 2012, and logging has reportedly been pursued at an unsustainable rate. The strong growth of the mid-2000s was halted in the world economic downturn of 2008–09, falling from 7.3 per cent in 2008 to a contraction of 4.7 per cent in 2009, but bouncing back with strong growth in 2010–11, then moderating to average about three per cent p.a. in 2012–15.